Beware of easy historical parallels – Merkel is no Brüning

As the crisis in the eurozone continues, commentators look to the past for parallels and warnings. Hysterical claims by British Euro­sceptics that the Germans are trying to conquer Europe by financial means and create a "Fourth Reich" have been met with the ridicule they deserve. The respected economics writer Martin Wolf of the Financial Times recently grasped for another, less obvious historical parallel. He wrote that Chancellor Angela Merkel's "attempt to vindicate the catastrophic austerity of Heinrich Brüning, German chancellor in 1930-32, is horrifying". And we all know who became German chancellor a mere eight months after Brüning.

Who was Brüning and what did he do? Did his policies open the way for the rise and triumph of Nazism? Born in 1885, he was a quiet, unassuming, rather reserved man who probably would not have reached the eminence he did without the help of a major economic crisis. Contrasting his studied, almost academic speaking style with the hysterical if calculated vehemence of Hitler, you can begin to understand why mainstream Weimar politicians seemed so dull to so many millions of voters.

Slash the wage bill

The most significant fact about Brüning is that he was a professional economist whose reputation brought him into the Reichstag as a deputy for the conservative Catholic Centre Party. From the start, he was fiercely critical of fiscal indiscipline. He denounced what he thought of as excessive public-sector salaries, on the one hand, and, on the other, the desperate money-grubbing of the prosperous middle years of the Weimar Republic so bitingly satirised by Brecht in Mahagonny-Songspiel ("Show us the way to the next little dollar") and The Threepenny Opera, with its line, "Erst kommt das Fressen, dann kommt die Moral" (very loosely translated: "First fill your belly, then you can be moral").

You have only to look at a photo of Brüning, with his bald head, rimless glasses and grimly set, thin-lipped mouth, to feel a chill run down your spine. This was a man who did not know what fun was and did not seem to approve of anybody who wanted to have a bit of it.

In 1930, however, Brüning seemed the right man to set the German economy to rights. The fragile prosperity of the mid-1920s had depended heavily on huge US loans, which were suddenly withdrawn as Wall Street crashed in October 1929. This set off a chain reaction as German banks tried to cover their losses by calling in loans to industry and as businesses, deprived of credit and unable to meet their repayments, went under. The government of Chancellor Hermann Müller, a Social Democrat leading a "grand coalition" of various centrist parties since 1928, fell apart under the strain. The then president, Paul von Hindenburg, called on Brüning to succeed him and form a government that could get a grip on the financial crisis.

As businesses collapsed and unemployment soared, tax revenues fell and government indebtedness skyrocketed. Brüning slashed the salaries of state employees by a fifth, reduced unemployment benefit and decreed that all wages should be rolled back to what they had been in 1927. It all seems too familiar. Like Mario Monti, recently installed as Italian prime minister, Brüning was regarded as a technocrat, an economist who would do what was necessary irrespective of political expediency. This proved to be a big mistake.

For behind Brüning's policies was a belief that mass unemployment would allow German industry to reduce wage costs and sell goods more cheaply abroad, thus stimulating an economic revival. In practice, this was entirely unrealistic, given that other economies were also in deep trouble and so foreign demand slumped as well. Beyond this, Brüning hoped to get political credit by showing the international community that Germany could not pay the huge reparations bills with which it had been saddled at the Treaty of Versailles in 1919. He seemed determined to make John Maynard Keynes's Economic Consequences of the Peace (1919) a self-fulfilling prophecy.

In 1931, a series of bank crashes further rocked the German economy. The western allies declared a moratorium on reparations payments, which solved one problem for Brüning, while the bank crisis forced him to take Germany off the gold standard, making it possible to devalue the mark and print money to finance job-creation schemes and stimulate demand. But now another factor came into play - the German fear of inflation, which Brüning used to justify rejecting this Keynesian alternative and sticking instead to his policy of fiscal conservatism.

Time difference

Behind this, some historians have argued, lay a deeper desire on Brüning's part to weaken the powerful German trade unions and the Social Democratic Party through continuing mass unemployment so that he could roll back the democratic political system of Weimar and go back to the authoritarian state of pre-war times. Brüning gave credence to this in his memoirs, in which he admitted to having hoped to bring back the kaiser, by then living in dyspeptic exile in Holland.

Certainly his economic policies all had to be implemented by presidential decree, because no majority could be found for them in the Reichstag. Besides this, Brüning curbed the freedom of the press and exempted the army from his cuts. Already people, not just the unemployed but others, too, were voting in their millions for the Nazis. Brüning's failures soon led to his dismissal as Hindenburg and his coterie sought ever more desperately to bring in the Nazis to give mass support to their plans to destroy democracy.

So while the eurozone crisis may be prompting the Germans to impose fiscal austerity measures everywhere, blissfully disregarding that it wasn't fiscal profligacy that triggered the crisis in the first place, it is wrong to draw a parallel with the deflationary policies of the early 1930s. These were adopted in a very different political and economic landscape. Merkel is not Brüning and 2012 is not 1930, let alone 1933.

Richard J Evans is Regius Professor of History at Cambridge and president of Wolfson College